How Can I Cut My Spending in 2020?

In 2019 I spent over $146,000:  $84K on our various business ventures and $62K on what I consider personal spending.

Expenses	-$146,371
AirBnB Expenses	-$54,311
Rental Expense	-$29,020
App Expenses	-$86
Interest Expense	-$199
Reimbursed Job Expense	$811
Unreimbursed Job Expense	-$2,144
Auto Expenses	-$7,211
Bank Fees	-$1,792
Clothes/Personal Care	-$1,193
Fun	-$10,104
Food	-$6,140
House Expense	-$17,204
Utilities	-$3,116
Health & Dental	-$8,677
Taxes	$2,103
Miscellaneous	-$8,088

My goal (or more strongly, my mandate!) is to drastically reduce expenses in 2020.  Here's the plan:

Airbnb Expenses

Last year our single Airbnb took in just south of $30,000.  But I spent $54,000.  It's easy to conclude expenses will be much lower this year:  in 2019 I replaced the siding and windows.  And I didn't go cheap - I selected the nicest windows and siding I could find.  I'm learning firsthand a business principle I've struggled to adopt:  simply, you invest in your best opportunities, not the cigar butts.

Once we realized its potential, I knew how important it was to upgrade some things to keep guests coming back.  A side benefit:  it's still early, but it looks like the power bill will be lower this year thanks to the better insulating properties of the windows and siding.

With that project checked off, the biggest change in 2020 will be that our Airbnb expenses will be significantly less than the income.

Rental Expenses

Four of our five long-term rentals are in the Birmingham, AL area.  Last year I sold 5 townhouses there.  Naturally, spending will be lower (rental income will be as well!).  Lately I've been dissatisfied with the performance of my Birmingham properties.  One of the most frustrating things is an empty property.  It simply takes longer to rent a house in Birmingham versus Tampa Bay.  It's been 60 days already for the one vacant property I currently have, and there haven't been any qualified applications.  I'm thinking about selling it.  Bottom line, rental expenses will be lower in 2020.

Fun

This is the discretionary category.  Technically, I don't have to spend anything here, but it gives us balance:  I live (and love) to travel!  In 2019 I spent over $10,000 on vacations, gambling, alcohol and movies.  In 2020, I will significantly reduce spending on fun, but not because we're going to have less of it!

How?  I joined a Facebook group called 10x Travel last year.  The group is all about opening new credit cards for the bonus points being offered.  Currently I'm working on earning a Companion Pass on Southwest Airlines.  In the process of earning the pass (which gets my partner a free seat on any flight I am on), I will earn 125,000 miles.  So, our spending on flights this year will be drastically reduced.  I've also accumulated thousands (in some cases, hundreds of thousands) of hotel points which we can use for free rooms.  By redeeming free flights and hotel stays, I expect this to significantly lower our spending in the "fun" category.

Other Observations

There are other categories that need to go down, but I'm not sure how much I can reduce.  The most obvious is spending on food.  It's a simple equation:  eat out less, save money.  I'm working on this.  Then there's auto expenses.  My car has over 200,000 miles on it, so keeping it will mean ongoing repair expenses.  Probably time to start looking at a new car.  With health and dental, the only thing that might go down is what I spend on dental work.  If my teeth stay healthy this year, I can save a bit.  Finally, spending on housing.  That's a big one:  I spent over $17,000 last year to keep a roof over our heads.  I would really like to move back to the area where our Airbnb is located.  Not only will this save time (two hours of commuting each time we clean - we made over 80 trips last year!), it will also save some on gas for the car.  A final benefit would be buying a house we can rent out on Airbnb when we aren't going to be there.  My partner has been reluctant to do this, but I think if I pick out the right house with the right layout, it could be a minimal inconvenience.  House hacking could significantly cut down our home costs.

So there it is.  These are the areas I'd like to reduce spending on in 2020.  What are your goals?

My Frugal Miser - December Income: $66,792

December income, less a one-time inflow, was mixed.  The Airbnb did amazing - nearly the entire month was booked.  We worked a meeting in New York and I did as many deliveries with Amazon as I could.  We also traveled to Birmingham for several days to work on a vacant rental property.  It's still vacant.  It's hard to rent a suburban home there during the winter.

Just before Christmas I received the inheritance from my paternal grandfather's estate.  My grandfather passed away 5 years ago, and my brother and I had no idea what we were inheriting.  We split our father's share.  It's not life-changing, but I'm grateful for it. 

December Income: $66,792

$48 Mystery Shopping
$890 Meeting Jobs
$8 Gig Apps (Rideshare, Scooter Charging, etc.)
$1,343 Amazon Deliveries
$2,880 Rental Income
$3,556 Airbnb Income
$60 Interest Income

$58,006 Other Sources

Investment Accounts Change in Value:  ($3,961)

In a rarity for 2019, my investments declined in value in December.  

My Frugal Miser - December Expenses: $17,550

December finishes the year in the red.  Personal spending was around where it normally is, but business expenses were high. 

I averaged $19/day for food.  This has to stop!  We ate out every meal while in Birmingham to work on one of my properties, as well as a couple of meals in Miami when we went to the Madonna concert.  There was also some holiday meal spending mixed in there.

There were some larger expenses.  I paid $190 for a new car battery.  We drove to Birmingham to work on a vacant rental property - 600 miles each way.  That used up a lot of gas.  I bought a $500 Amazon gift card to take advantage of a 5% cash back offer.

Business expenses won't be nearly as high in 2020.  I made the final payment on the new siding at the Airbnb.  As I mentioned, we went to Birmingham to do some work.  This entailed a hotel room and supplies including paint and repair materials.

December Business Spending:  $12,989
December Personal Spending:  $4,561

December Expenses:  $17,550

$527 Auto (service, gas, insurance, AAA, etc.)

$199 Bank Fees
$38 Clothing/ Personal Care
$408 Fun (vacations movies, gambling, alcohol, concert tickets)

$590 Food

$406 Health and Dental

$1,498 Household/Mortgage Payment/Home Repair

$0 Interest Expense

$60 Miscellaneous

$494 Taxes includes quarterly tax payments
$0 App Jobs Expenses (tolls, car washes, etc.)
$60 Unreimbursed Job Expenses
($59) Reimbursed Job Expenses

$340 Utilities
$1,822 Rental Property Expenses
$11,167 AirBNB Expenses

Preparing for a Cash Avalanche in 2020

I've started to think about my 2020 finances.  2019 seemed like a tight year, so I looked back to see where all the money went.  Besides maxing out my Roth IRA contribution, I've contributed nothing towards savings.  In fact, I've borrowed from my brokerage account to pay for improvements to the Airbnb.

So, what happened?

By year end I will have spent over $50,000 on the Airbnb.  This year I replaced all the windows with hurricane impact windows, installed new siding, and replaced the HVAC system.  The siding replacement included replacing a lot of rotten wood around the house.  Overall, the house is in really good shape now.  While there are a few other projects that I need to do, they won't cost nearly as much as what I did this year.  I'm fairly confident I'll spend under $10,000 in 2020 on the Airbnb.  That's a $40,000 difference year over year.

Rental property expenses were the second highest expense this year.  At the beginning of the year I remodeled the kitchen in one of the townhouses.  Then I decided to sell all the townhouses.  Because I sold those 5 properties, rental expenses will be lower (income will obviously be lower, too).  I'll end up spending close to $30,000 this year.  Next year the total will be much lower.

The third highest expense was for our primary residence.  I'm not ready to announce anything yet, but I am thinking hard about moving closer to our Airbnb and reducing our monthly housing costs.

Finally, all the other spending categories can fairly easily be reduced:

• We are going to prepare meals at home more often - that's going to be tough to stick to, but it's my top commitment on a day-to-day basis.  This should lower our food cost.   
• I had a lot of dental work this year which shouldn't repeat in 2020.  
• I will probably buy a new car soon, which will cut down on repair costs.  
• Last, I plan to be smarter when planning vacations.  I will continue signing up for new credit cards to earn bonus rewards.  Right now I am working on earning 70,000 Southwest Airlines Rapid Rewards through a new credit card I just opened.  We will still travel next year, but hopefully the flights and hotels will be as close to free as we can get.

Taking all these actions into consideration, cash flow in 2020 should be substantial.  I'm planning to use the cash to build up my brokerage account (basically "repay" the withdrawals I've made this year), pay down the mortgage on one of my rental properties, and build cash reserves for the next recession.